Nationwide, Britain's biggest building society, has become the first lender to re-introduce mortgages worth up to 95 per cent of a property's value.

But the new home loans, which are only available to existing customers who are moving house, come at a high price. Borrowers wanting a fixed-rate deal will have to pay 7.18 per cent — 5.18 percentage points above the Bank of England base rate. The building society offers homeowners with a 40 per cent deposit a similar deal at 5.38 per cent, a difference of £225 a month on a £150,000 interest-only loan.

However, Britain's third-biggest lender also unveiled new tracker deals yesterday. A new two-year tracker for customers with a 5 per cent equity stake costs 5.49 per cent, 3.49 percentage points above base rate. Nationwide's best tracker deal for customers with a 40 per cent deposit is 4.49 per cent, 2.49 percentage points above base. This is also almost double the rate of its previous 95 per cent loan-to-value tracker deal, which was available in August, at 1.78 above base.

Andrew Montlake, of Cobalt Capital, a broker, said: “These deals are expensive but lenders are now pricing for risk. Re-entering the 95 per cent market is a bold move and it will help Nationwide's customers who desperately need to move house but couldn't find the finance. However, it is first-time buyers who would benefit most and they have been excluded.”

Nationwide has also taken the opportunity to increase the cost of its fixed-rate deals for borrowers with a 15 per cent deposit by up to 0.3 percentage points, despite a dramatic fall in the cost of wholesale mortgage funding for new lending. Two-year swaps, which lenders use to fund fixed-rate mortgages, have fallen substantially in the past three months.

A two-year fixed-rate deal for borrowers with a 15 per cent deposit has jumped from 6.18 per cent to 6.48 per cent. Mortgage experts hope the introduction of 95 per cent loan-to-value deals by Nationwide will encourage other lenders to follow suit.

At the beginning of the year there were almost 900 mortgage deals on the market for borrowers with a 5 per cent deposit or equity stake in their home, according to Moneyfacts.co.uk, the financial website. The number of deals requiring a 40 per cent deposit has increased from 10 at the beginning of the year to 149 today.

Darren Cook, of Moneyfacts, said the figures “illustrate how banks and building societies have shifted their focus from rate to risk. Reducing property values are the main culprit, resulting in customers finding themselves in negative equity and banks being over-exposed.”

Lenders have launched a number of fixed-rate mortgages in recent weeks but trackers, which are pegged to the base rate, remain the most popular mortgage.

Last month Nationwide introduced a lower threshold or “collar” on new tracker deals of 1 per cent, preventing borrowers from benefiting from cuts in base rate if it drops below 1 per cent. Most of the lender's existing borrowers are on tracker deals which have a collar of 2.75 per cent. Nationwide chose not to enforce its collar when the Bank of England cut the base rate to 2 per cent last month but it said it may do so in future.